Effective January of 2018, the expanded MiFID II – Markets in Financial Instruments Directive (“MiFID II”) and Packaged Retail and Insurance-based Investment Products (“PRIIP”) regulations within the European Union (‘EU’) were implemented to regulate EU investment managers and broker-dealers, and enhance disclosure for the buy and sell-side regarding investment products.
Horizons ETFs Management (Canada) Inc. (“Horizons ETFs”) does not carry on business activities in the EU and is not subject to these disclosure requirements. However, we note that, generally speaking, our Fact Sheet (found on the landing page of each ETF) and the Regulatory ETF Facts document (found in our Regulatory section, and also through each ETFs landing page), combined, provide comparable relevant information about each ETF. These documents, combined with all other disclosure contained on our site (such as each product’s Legal Entity Identifier (“LEI”) number, found on each product page), should provide sufficient information to any EU distributor in order for them to comply with regulations.
Further, while we note that Horizons ETFs does not typically engage in broker-commission soft dollar arrangements, the Financial Statements of each ETF will identify the value of any such arrangements.
The answer is yes, many of the BetaPro ETFs are available for options trading. View the list of applicable ETFs on the TMX website where investors can also view their real-time option chains.
ETFs generally have three sources of liquidity:
1. The stock exchange on which they are listed;
2. Market Makers (designated broker-dealer firms) provide a minimum amount of liquidity by buying shares from the secondary market or selling shares to the market from their own inventory if there are too few buyers or sellers, or if bid/ask spreads get too far out of line with the NAV per share of the ETF’s underlying assets; and
3. Authorized Participants (typically broker-dealer firms) are able to issue or redeem very large blocks of shares known as “Creation Units” on each official valuation day to meet excess demand, or to absorb excess supply in the market.
An ETF’s market price is not necessarily the same as its net asset value (NAV) per share. All ETFs have two end-of-day “values”. One is a closing market price, which is determined by trading activity in the ETF’s shares on the stock exchange (usually the price at which the shares last traded during a trading session).
The second is the net asset value (NAV) per share, which is calculated by the ETF’s independent fund accountant after the market closes. The ETF’s NAV is the weighted average price of each of its underlying assets, plus income and cash, minus liabilities such as management fees and expenses.
An ETF’s market price and NAV per share are typically close to each other but they may differ, especially in times of heightened market volatility.
A premium or discount to NAV per share occurs when the market price of an ETF trades on the exchange above or below the NAV per share of its underlying basket of securities. For example, an ETF may trade at a premium or discount when:
• its underlying assets trade at different hours than the stock exchange (e.g., commodities)
• its underlying assets trade infrequently (e.g., bonds)
• markets are in a heightened state of instability or flux (e.g., at the open and close of a trading day)
Although infrequent, ETFs (like regular mutual funds) can be closed, usually as a result of extremely low investor interest. Horizons ETFs is required by law to make a public disclosure of its intent to de-list and close an ETF.
After the public disclosure of an ETF closure is made, subscription activity is immediately halted. Investors can sell their ETF units at any point up until the end of the de-listing day.
Similar to all ETFs, there are designated brokers ensuring the ETF price remains close to NAV (minus a small spread), however where an ETF is being terminated, the bid will remain tightly correlated to the NAV per unit of the ETF while the offer will widen since no new units can be subscribed for. Market Makers will typically only buy units in the market, which means investors will typically only be able to sell their units in the market.
If a unitholder sells their units of the ETF on the exchange before the de-listing date, they will get the cash proceeds from the sale after the settlement period. If they did not sell prior to the delisting of the ETF, they will typically receive the cash proceeds approximately 7 days after the de-listed date.
An electronic copy of the prospectus can be downloaded from the Horizons ETFs website ETF product page.
To receive a print copy at no charge, please contact us at 1 866 641 5739 toll free or info@HorizonsETFs.com.
To find out more about Horizons ETFs, please contact your advisor or contact us directly at 1-866-641-5739 toll free or info@HorizonsETFs.com.
The Horizons ETFs are listed on the Toronto Stock Exchange pursuant to prospectuses filed with Canadian regulators, in accordance with Canadian securities laws and regulations. None of the exchange traded funds managed by Horizons ETFs Management (Canada) Inc. are regulated by nor registered with the U.S. Securities and Exchange Commission (SEC), or with any other foreign regulatory body. Generally, non-residents of Canada, including U.S. residents, may invest through a local broker in their jurisdiction that has facilities for directly or indirectly executing orders on the Toronto Stock Exchange.
However, at no time may non-residents of Canada be the beneficial owners of a majority of the Units of any one of our ETFs. If at any point the Manager expects or believes that more than 40% of the Units of an ETF are beneficially held by non-residents, the Manager may elect to send notice to one or more such non-resident holders requiring them to sell all or a portion of their units of such ETF within a stated period of time. If such Units have not been sold within the stated period of time, the Manager will suspend the voting and distribution rights associated with those Units and sell the Units on the holders behalf. The rights of affected holders in such instance are limited to receiving the net proceeds of the sale of such Units.
Yes, all ETFs offered by Horizons ETFs are eligible to be held within all accounts.
A premium or discount to an ETF’s NAV per unit occurs when the market price of an ETF is above or below that NAV per unit.
The importance of understanding a premium and a discount is relevant when considering investing in an ETF. The level or size of premiums and discounts is generally greater when:
• the underlying assets of the ETF trade at different hours from the ETF (i.e. commodities)
• the underlying assets trade infrequently (i.e. bonds)
• the markets are in a greater state of instability or flux (i.e. at the Open and Close of a trading day)
All ETFs have two end-of-day “values”. They have a closing market price per unit, as determined on the exchange, (the trading session’s last trade), and a net asset value per unit (NAV), as determined by the ETF’s independent fund accountant after the market closes
The closing price is typically the last transaction price of the ETF recorded by the Toronto Stock Exchange, whereas the NAV per unit is an independent calculation created by the ETF’s fund accountant, which calculates the market value of each unit based on the underlying value of the securities held by the ETF net of all its liabilities.
Since there may be a lag between the last time the ETF traded and changes in the underlying value of the ETF’s holdings, the NAV per unit would generally be considered a more accurate representation of the market value of the ETF.
Units of Horizons ETFs trade on the Toronto Stock Exchange (TSX). Units can be bought and sold throughout the normal trading day, using an online, discount or full-service brokerage account.
Similar to mutual funds, ETFs are typically structured as an open-ended investment trust, meaning that new units of the ETF can be created (or redeemed) to meet demand as required. The liquidity of the ETF unit on the stock exchange is heavily dependent on the liquidity of the underlying holdings in the ETF portfolio. There are two important market mechanisms to ensure ETFs have adequate liquidity:
1. They are listed on an exchange; this provides a market for them to be traded in a transparent manner.
2. Each ETF has a designated broker obligated to create and redeem its units. In addition, there are other institutional traders known as Market Makers which also participate in the market to provide units on the exchange. This enables an investor to buy and sell units of the ETF at a price that is close to the NAV, excluding any brokerage fees.
“ETF” stands for exchange traded fund, which, like a regular mutual fund, may invest in an underlying basket of assets such as stocks, bonds, currencies, options or commodities. Unlike regular mutual funds, however, the units of ETFs trade on a stock exchange just like common stock. This means that pricing is transparent and ETF units can be bought and sold throughout the regular trading day.
ETFs are flexible investment tools designed to be used by both individual and institutional investors. As a basket of investments, ETFs offer the diversification of mutual funds, but typically at a fraction of their cost.